Scenario Planning vs. Forecasting

 

Change is frequently challenging, but it is inevitable.  There is always going to be unavoidable change, that will be impactful and oftentimes disturbing to our way of life.  Therefore, we have to plan for change and be proactive rather than reactive.  The future is uncertain, however, as innovators, we can plan ahead. 

There is often some confusion regarding scenario planning versus forecasting.  They both involve forward thinking; however, the methods are different and require specific tasks.  They both add value and assist with having mitigations in place to address any unforeseeable impediments.

Scenario planning involves identifying all of the stories that make up the bigger picture.  You have to consider all of the paths that will lead to you to your desired future state and identify the stories along that path.  Scenario planning involves looking at all of the interacting events that align together to identify the paths that lead to the bigger picture.  This approach is all about cause and effect and identifying the critical paths and the critical decision points.  This adds value because it helps you to prepare ahead of time, you can easily identify risks and have mitigations in place to deal with the uncertainty of foreseen events.  It’s about analyzing your current state against your desired outcomes and identifying plausible futures.  This approach allows innovators to create various narratives that include scenarios that require group collaboration. This approach allows you to rely on past experiences and lessons learned rather than relying solely on numbers from a quantitative perspective.  Scenario planning involves the following six steps;

1.      Defining the challenge

2.      Gathering information for an analysis

3.      Identifying the driving forces

4.      Defining the future state

5.      Creating the scenarios

6.      identifying the stories with the scenarios. (Wade, 2012).

Scenario planning should include long-term planning and defined scopes that have identified all risks.  With scenario planning, you cannot test for accuracy because the information does not have any historical context.  This approach is based on guessing and assumptions.  Scenario planning helps you to identify barriers to performance ahead of time and to put a plan in place to address these identified risks before they occur. 

Forecasting takes a different approach and involves looking at the world with the lenses that you use today.  Forecasting does not involve creating scenarios, it looks at the challenges that you have today.  It is about planning to resolve the same challenges that exist today but forecasting how to address these challenges in the future if the same challenges occur.  With forecasting, you can more easily test for accuracy.  This is a fact-based process.  Forecasting does not include identifying risks; it involves using quantitative data to predict what could happen if the same problem is encountered.  This is done by looking at historical data.  This helps to resolve some short-term problems and is more based on historical data, whereas scenario planning is about being forward thinking and identifying the “what if scenarios”.

To summarize, scenario planning involves multiple possibilities, whereas forecasting only considers one possible future.  Both methods add value, they are simply different ways to solve problems.  It is essential that you plan ahead, and that you sharpen your vision for the road ahead and identify impediments before they occur.  This allows you to be better prepared for new competitive challenges, and to be ready for new opportunities that lie ahead.  This is another source of innovation, which comes from imaging and exploring alternative paths.  There are various techniques and tools that are used for forecasting and for imaging alternative futures, which can be used to help strategize new possibilities for innovation (Tidd & Bessant, 2020).  Don’t forecast the future, anticipate it. 

 

References

Wade, W. (2012). Scenario Planning. Wiley Professional, Reference & Trade (Wiley K&L).

https://coloradotech.vitalsource.com/books/9781118237410

Tidd, J., & Bessant, J. R. (2020). Managing Innovation: Integrating Technological, Market and

Organizational Change, Enhanced Edition (7th Edition). Wiley Global Education US. https://coloradotech.vitalsource.com/books/9781119713197